GDP Falters On Third Estimate, Shows US Economy Contracted In Q1 Driven By Corporate Profit Collapse

The third and final estimate of Q1 2014 GDP showed a heavy contraction in the US economy. GDP Y/Y percent loss was 2.9 in contrast to the first estimate which showed a 0.1 percent increase. The contraction, as has been popular this year, is being blamed on severe weather keeping shoppers at home which constrainted corporate profits.

The BLS listed the causes of the downturn from a +2.6 percent in Q4 2013 to -2.9 percent in Q1 2014 as:

• downturn in exports
• larger decrease in private inventory investment
• deceleration in PCE
• downturn in nonresidential fixed investment

As for corporate profits “Profits from current production...decreased $198.3 billion in the first quarter, in contrast to an increase of $47.1 billion in the fourth” further showing the downturn in spending by US consumers”. Corporations also paid more in taxes on corporate income, reporting $27.8B in Q1 2014 compared with $13.3B in Q4 2013.

US Futures promptly sold on the news and gold futures spiked.